Strategic Audit of Haier Group Pronounce High er Case 24 Strategic Management MGMT 436 Group 5

Current Situation (Jw Hayes) Current Performance 2001 to 2004 Organized into 6 Divisions: Haier China Haier Europe Haier America Haier Middle East Haier Spain Haier New Zealand (L., and Hunger 24-2)

Top 100 Most recognized Worldwide Brand Name 20 Year Old Company from China Produce Home Electrical Appliances 18 Design Centers 10 Industrial Parks 30 Overseas factories and manufacturing bases 58,800 Sales offices 96 Product Group Categories To include : Refrigerators, Washing Machines, Air Conditioners, Cell phones, TV’s (Jw Hayes) (L., and Hunger 24-1)

4th in Global Sales revenue for White goods in 2004 (Jw Hayes) 2004 Global Sales $12 Billion 4th in Global Sales revenue for White goods in 2004 21% Market Share China overall Appliances 34% Market Share China Major Home appliances 14% Market Share China small electronic appliances White goods are major home appliances refrigerator, stove, washing machines Brown goods are TV’s radios, DVD VCR’s (L., and Hunger 24-16)

B. Strategic Posture Mission Objectives (Jw Hayes) B. Strategic Posture Mission To improve the quality of life, focusing on customers' needs Objectives Haier strives to create innovative and affordable quality products, to deliver sincere, delightful and caring services, in order to satisfy different customers ("Haier: about us," 2011)

Policies Expand Brand Recognition (Jw Hayes) Policies Expand Brand Recognition Offer Niche products while expanding diverse product line Maintain strict cost control to keep product prices competitive Continue quick development programs and fast production updates Maintain strong distribution network and supply chain relationships (L., and Hunger 24-1-26)

Three Stage Growth Plan (Jw Hayes) Strategies Three Stage Growth Plan Brand Name Strategy 7 years built strong brand name in Refrigerator products thru Total Quality control System Products known for quality and innovation Diversified Development Strategy 6 years to diversify product catalogue By 2004 13,000 products in 86 categories L., and Hunger 24-23-24)

Going Multinational Strategy First move into Southeast Asia (Jw Hayes) Going Multinational Strategy First move into Southeast Asia Second expand into United States in 1990’s European entrance in 2001 Japan expansion in 2002 2005 Haier has 62 distributors and 30,000 retail outlets worldwide Eventual Goal To be listed among Fortune 500 Successful Companies L., and Hunger 24-23-24

2. Corporate Governance Board of Directors (Jw Hayes) Name Title Age Zhang Ruimin Chairman and Chief Executive Officer 61 Yang Mianmian President and Director 65 Chai Yongsen Executive Vice President and Executive Director 44 Cui Shaohua Vice President and Executive Director 49 Song Chunguang Vice President, Sales Director of Pegasus Qingdao, Deputy General Manager of Pegasus Qingdao and Executive Director 43 Liang Haishan 40 Cao Chunhua Vice President, General Manager of Washing Machine Division and Executive Director 38 (Bloomberg, 2011)

OTHER BOARD MEMBERS ON BOARD MEMBERS (Jw Hayes) OTHER BOARD MEMBERS ON BOARD MEMBERS Name (Connections) Primary Company Age Wu Kesong Haier Group Company 56 Kin Kau Lam Mark Neo Telemedia Limited Wu Yinong Haier Electronics Group Co., Ltd. 44 Hoi Wing Fung Henry Global Energy Resources International Group Limited 51 (Bloomberg, 2011)

Pearson College Div, 2009. 24-1-24-26. Print. (Jw Hayes) Bloomberg, Initials. (2011, May 10). Industrial conglomerates. Retrieved from http://investing.businessweek.com/research/stocks/private/board.asp?privcapId=29621318 Haier: about us. (2011, May 10). Retrieved from http://www.haiereurope.com/en/haier-mission L., Thomas, and David Hunger. Strategic Management and Business Policy: Achieving Sustainability. Pearson College Div, 2009. 24-1-24-26. Print.

III. External Environment (EFAS table) (John Lerch) A. Natural Environment Weather factors associated with shipping overseas (T) Long shipping times (T) B. Societal Environment Economic Lower production costs in China (O) United States market is the largest in the world (O)

Technological Political-Legal Socio-cultural (John Lerch) Technological Rapid growth in electronics market (O) High initial costs for producing products with more features than (T) Political-Legal High cost of competitors duties by manufacturing overseas and selling in the U.S. (T) Socio-cultural Desire for new electronics in U.S. market (O)

C. Task Environment Rivalry high in the U.S. (T) (John Lerch) C. Task Environment Rivalry high in the U.S. (T) Able to expand product lines through partnerships (O)

III. EFAS Table(John Lerch)

IV. Internal Environment (John Taylor) Corporate Structure Started out in 1984 as a government owned enterprise. In 2004 was organized into Haier China, Europe, America, Middle East, Spain and New Zealand Divisions. In 1999 established a Design Center in Boston, a marketing center in New York, and a Manufacturing facility in S.C. Corporate Culture Modify products to meet American Had built a reputation at home (China) for quality, innovation, and customer service. The main goal of the company was to continuously increase the volume of products sold in the U.S & modify products to meet U.S. demands

(John Taylor) C. Corporate Resources 1. Marketing a. Introduced its Two Brothers logo into the U.S. market to boost its brand image. (W) b. Promoted mostly by outdoor advertisement, airports, magazines, heavily in trade publications, and on the internet. Outdated website. (S) c. Little TV advertising, company sponsored sports teams and low brand awareness. (W)

(John Taylor) 2. Finance a. 85% of company orders came from top 10 Chain stores in U.S. and Europe (S) b. Average annual growth rate of 78% from 1984-2001. (S) c. Ranked 4th in major appliance sales worldwide at the end of 2004. (S) 3. R&D a. Sluggish new technology development (W) b. Needs to develop technology for “smart appliances” (W)

4. Operations a. Reached a strategic cooperation agreement with COSCO in 2004, to help explore business opportunities worldwide. (S) b. Strong distribution network and good relations with both chain and individual stores. (S) c. H.A. Has lack of U.S. distribution centers and limited exhibition space of standard products compared to major competitors. (W) (John Taylor)

(John Taylor)

V. Analysis of Strategic Factors (John Lerch) Situational Analysis (SWOT) Strengths Promotions by outside advertisements (magazines, trade publications, etc) 85% of orders came from top 10 chain stores in U.S. and Europe Ranked 4th in major appliance sales in 2004 Agreement with Cosco in 2004 Strong distribution network and good relations with chain and individual stores

Sluggish new technology development (John Lerch) 2. Weaknesses TV Advertising Sluggish new technology development Need to develop “smart appliance” technology 3. Opportunities Introduction of products to U.S. market at lower cost International Partnerships

Competition in U.S. market (John Lerch) 4. Threats Competition in U.S. market Lower response rate for stocking certain products and overstocking High initial investment to manufacturer products with more features than competitors

V. Analysis of Strategic Factors (John Taylor) B. Review of Current Mission and Objectives 1. Needs to build brand recognition and enhance its brand image. 2. Expand U.S. facilities to allow for in country manufacturing of company products. 3. Introduce a wider range of products into the U.S. market.

V. SFAS Table (John Lerch)

VI. Strategic Alternatives and Recommended Strategy (Shavera) A. Strategic Alternatives 1. Stability Strategy: Pause/Proceed with caution. a. Pros: Enables the company to focus on new market strategies, and consider focusing on its core products. b. Cons: Possible loss of market share. 2. Growth Strategy: Horizontal Growth Strategy. Target niche markets in the U.S. by developing a wider range of products and services to satisfy their needs.

a. Pros: Enables the company to more quickly capture and respond to a. Pros: Enables the company to more quickly capture and respond to local trends and increase competitiveness (Wheelen & Hunger, 2010). b. Cons: Aggressive competition (Shavera) 3. Retrenchment Strategy: Sell Out/Divestment Strategy. a. Pros: Allows the company to exit out of markets like the personal computers that are struggling and unprofitable. b. Cons: Loss of market share and a decrease in profits.

B. Recommended Strategy Recommend alternative # 2 which is the Horizontal Growth Strategy. Haier Company needs to focus on niche markets in the U.S. to satisfy those customers’ wants and needs. The concentration should not be on diversification, but rather building a strong brand name and image in the U.S. (Shavera)

(Shavera) Wheelen, T & Hunger, J. (2010). Strategic Management and Business Policy. 12th Ed. Prentice Hall.

(Travis) VII. Implementation A. Competition for Haier is all over the place. Finding something like a new hit product that will make them stick out over all the rest will benefit the company highly. However they need to be careful to spend their money in the right areas and make sure it doesn’t go to waste ending in a overall bankrupt.

(Travis) B. Haier needs to improve its stocking abilities by using technology to their advantage. They seem to lack in keeping popular items on hand and ready to ship. Using technology will help them keep up with what sells out the quickest in various locations.

VIII. Evaluation and Control (Nick) VIII. Evaluation and Control With Programs in place The Haier Group seems to have there evaluation and control in place. The Haier group has had three growth stages Brand Name Strategy, Diversified Development Strategy, and Going Multinational Strategy

(Nick) 2. To better on the already ever improving Haier Group CEO Zhang Ruimin combined traditional Chinese culture and Western industrial experience. Which this in turn meant the Implementation of OEC (Overall Every Control and Clear) market- chain system. To help aid this Strategic Business Units were also put in place to help encourage employee enthusiasm and competitiveness.

(Nick) 3. There have been many different plans and strategies have been put in place to keep the management and overall company structure ahead of the competition. Lack of technological advancements or even sluggish technology is the only thing holding the company. With the philosophy of the management to already quickly identify problems, search for the cause of the problem and find a solution one by one. There should be no reason for this company having any problems finding ways to evaluate and control.

The End. Questions?